Pipelines to payloads: risk management lessons for the space economy

The energy sector has spent decades learning how to manage complex disputes that touch on sovereign power, geopolitics, regulation and private capital. Those same dynamics are at play in the rapidly expanding commercial space economy. Like energy investors, today’s private space financiers and operators are investing in complex, capital-intensive infrastructure that crosses national borders. It is prudent for these companies to consider how best to protect their costly investments in the event of a future dispute. There are five key lessons that the space industry can learn from international energy disputes over the years. Lessons from an industry with a similar risk profile Space and energy share a common risk profile: They involve long-term investments with high upfront costs repaid over years or decades; enduring state leverage (including through state-owned enterprises); exposure to political and geopolitical risk; intense regulatory oversight; national security sensitivities and reputational “social license” pressures. These hallmarks of the energy field increasingly characterize private ventures in the space economy. Despite these shared features, the legal frameworks governing the two sectors diverge sharply. Energy disputes typically arise because a host state acts within its own territory against a foreign investor’s assets, a paradigm for which international investment law was designed. Space investments, by contrast, involve assets operating in areas beyond any state’s sovereignty, creating jurisdictional and enforcement challenges that existing legal frameworks were not built to address. Whereas the energy sector benefits from an established, worldwide treaty framework protecting cross-border investments (including customized instruments such as the Energy Charter Treaty, established in the 1990s to protect and promote international energy cooperation), international space law offers no comparable system to protect private investments in space. The Outer Space Treaty (1967) and the Liability Convention (1972) establish obligations between states, but neither creates direct rights or remedies for private actors. The Outer Space Treaty encourages States to enter consultations in case of “potentially harmful interference,” and the Liability Convention provides a negotiation and claims commission procedure for inter-state disputes. This framework is poorly suited to assist space companies who may need timely relief from unfair, discriminatory, or even expropriatory state measures. Much less does it assist companies whose costly investments may be affected or even destroyed by state action undertaken in outer space. While space companies benefit from the global network of bilateral investment treaties (“BITs”) that generally protect foreign investments on Earth such as those that cross national borders, and where the companies have structured their investments to obtain coverage, such protections have limits. BITs do not always apply, and…